RBS was among the banks bailed out by the UK government during the financial crisis (Source: Getty)

Jasper Jolly

The UK’s banks are still vulnerable to a “toxic cocktail” of risks for which the taxpayer may have to foot the bill, according to the head of the Treasury Select Committee (TSC).

TSC chair and Conservative MP Andrew Tyrie is launching a new inquiry into the sector, stating that the public has a right to know of the risks they are facing despite measures which were designed to stop banks becoming “too big to fail”.

Tyrie will announce an inquiry this week into whether the latest regulatory measures are tough enough to avoid future government bailouts of banks in the event of another financial crisis.

After the 2008 crash the UK government was forced to bail out banks including RBS, Lloyds TSB and HBOS, to avoid a full-blown collapse of the banking industry.

Tyrie said: “The public was forced to foot the bill – and a large one – when the banks got into trouble during the crisis. They are still footing the bill now, with the profitable disposal of RBS looking like an ever more distant prospect.”

“The public have a right to know whether they are now adequately protected,” he added.

In the wake of the banking crisis, regulators around the world responded by requiring banks to hold more capital and ensuring that high street banking capital was separate from riskier investment bank operations. This so-called ring-fencing will come into effect later this decade.

“It is vital this problem be solved,” said Tyrie. “The assumption that failing banks would receive public support was part of a toxic cocktail of misaligned incentives which contributed to the financial crisis.”

The inquiry – which will take evidence until March – will also investigate the implications of Brexit on the UK’s banking stability.